Horizontal Fixed Asset Review – Executive Summary of the Final Report

On this page

• Introduction
• Background
• Review framework and methodology
• Review findings and observations
• Root cause analysis
• Shared path forward: real property transformation
• Immediate foundational actions
• Conclusion

Introduction

Federal real estate is at the heart of everything that the government does – from delivering programs and services to Canadians, to building the economy, to realizing broader government objectives. With 32,000 buildings, 23 million square metres (m²) of floor space, approximately 20,000 engineering assets, and 39 million hectares of land, the Government of Canada owns and manages the largest fixed asset portfolio in Canada. The government spends approximately $10 billion annually to administer this portfolio, the replacement value of which is estimated in the order of $100 billion. Approximately 10,525 employees (4% of the federal public service) carry out a variety of real property functions across the government.^{Footnote 1} Recognizing the value of real estate as a key enabler of program delivery, and the challenges facing this portfolio, the government announced a horizontal review of federal fixed assets in Budget 2017. Led by the President of the Treasury Board with the support of the Comptroller General of Canada, the goal of the Horizontal Fixed Asset Review (the Review) was to identify ways to improve the management of federal real property to generate greater value from government assets.

The Review conducted the most extensive study of the federal real property program in over 35 years and developed detailed observations and a comprehensive suite of recommendations. Highlighting that the status quo is not sustainable, the Review recommends that the government transform how it does business (that is, management of real property) and what it delivers (that is, a modernized portfolio). This transformation will achieve a more proactive and innovative approach that shifts the perception of real property from a cost-driver and source of liability to a strategic platform, positioning Canada for the 21st century and beyond. The benefits of this transformation will be significant given that the reach of the federal real property portfolio extends from densely populated urban centres and northern, rural and remote communities to capital cities around the world. By going beyond the traditional way of managing real property, this portfolio can be leveraged to realize government priorities (for example, fighting climate change and creating jobs), while also increasing efficiencies, unlocking value, and expanding the portfolio’s benefits to Canadians.

Although the Review was launched three years ago, it has never been timelier than now to deliver this comprehensive report on real property management given the significant changes that the novel COVID‑19 pandemic has unleashed in Canada and around the world. These changes have raised questions in all jurisdictions about real estate. From office environments to warehousing, the judiciary, laboratories, prisons and border crossings, what will the built environment look like as the impact of technology accelerates and the long-lasting effects of the pandemic unfold? In a context where we are searching for responses to such questions, the observations of the Review have become more relevant than ever and the implementation of its recommendations even more urgent. The Review has been calling for an integrated, phased transformation that will facilitate a shift from the legacy portfolio and traditional management practices to a modern, agile, right-sized and sustainable portfolio, managed with a forward-looking, strategic and citizen-centric perspective. The current context provides a generational opportunity to turn this vision into reality.

The Review has been a critical starting point for the government’s real property transformation, but it cannot be the journey’s end. The change management that has been initiated by the Review needs to be maintained with a clear mandate, and be accompanied by targeted and intentional actions, with agility, a sense of urgency and speed. This Final Report is the culmination of three years of extensive investigation and analysis. It presents the Review’s observations, recommendations and proposed actions, which aim to facilitate genuine transformational change to create a modern, agile, and financially and environmentally sustainable government real estate that benefits everyone in the 21st century and beyond – government real estate in service of Canadians.

Background

Real property assets acquired or built by the Department of Public Works before and after Confederation attest to the close relationship between the built environment and the socio-economic success of Canada. Between 1867 and 1881, post offices, customs houses, penitentiaries, armouries and immigration ports were constructed, laying the foundation for government programs for the next century. Similarly, federal infrastructure, invoking images of the utilities, bridges, dams, roads and other early symbols of engineering achievements, “changed the face of Canada and helped to propel the country into a new era of prosperity and opportunity.”^{Footnote 2} For example, federal investments in the transcontinental railway supported western development and economic prosperity, while investments in water and wastewater treatment systems combatted disease and promoted public health. The real property portfolio grew exponentially between 1953 and 1967. During this period, changes to the role and breadth of government programs, including federal developments in northern Canada, penitentiary system reform, the bolstering of Royal Canadian Mounted Police facilities, and the construction of new research laboratories, spurred growth within the federal public service and drove the expansion of the fixed asset portfolio.

The federal government’s real estate is still the foundation upon which the provision of federal public services rests. Therefore, it is important to understand how the relationship between real property, evolving government priorities and specific departmental requirements manifests, especially in a context where the landscape of work and the provision of government services are changing significantly due to digital disruption as well as socio-economic and environmental conditions. The management of the federal real property portfolio is currently distributed across 16 departments, 11 agencies and 38 Crown corporations. Deputy heads of custodial organizations^{Footnote 3} are accountable for their respective portfolio and must adhere to the legislation and policy frameworks that govern the management of federal real property, such as the Financial Administration Act, the Federal Real Property and Federal Immovables Act, the Treasury Board Policy on the Planning and Management of Investments, and the Treasury Board Policy on Management of Real Property.

Over the years, several reviews have been conducted on the delivery of government programs and the management of federal assets; however, a comprehensive review of real property management has not been undertaken in over 35 years. In 1960, the Royal Commission on Government Organization (also known as Glassco Commission) investigated the structure and methods of operation by federal government departments. Identifying real property as a critical input to program delivery, the Glassco Commission recommended changes to real property management to improve efficiencies.^{Footnote 4} The 1984 Auditor General’s Report to the House of Commons examined several government-wide activities, including real property. This report identified a “lack of concern with economy and efficiency” in the management of federal fixed assets, which was evidenced by the “failure to manage real property in a way that recognizes its value; failure to comply with policies [as well as] install and use effective monitoring and control systems.”^{Footnote 5}

In 1985, the Ministerial Task Force on Program Review produced a report titled Management of Government: Real Property (known as the Nielsen Report). The recommendations of this report led to the establishment of the real property management model that is still in place today. The Nielsen Report confirmed the decentralized custody model that was in place and recommended the establishment of the Bureau of Real Property Management at the Treasury Board of Canada Secretariat (the Secretariat) to provide central leadership, coordination and oversight functions. The Nielsen Report also recommended the transfer of responsibilities related to the management of general-purpose space (that is, office accommodation) and the provision of real property common services (that is, maintenance, architectural and engineering contracting services) to Public Works Canada.^{Footnote 6}

A 1994 Auditor General’s Report to the Parliament noted that while the federal government had implemented a variety of legislative and policy changes since the Nielsen Report, there was still significant room to improve the management of federal real property. This report identified “several constraints to the businesslike management of real property, noting … an urgent need for government to strengthen the central oversight of the management of real property, including improved monitoring practices, and to make changes that will reduce constraints, to ensure that these valuable assets are managed more economically and efficiently”.^{Footnote 7} The 1994 Auditor General’s Report also recommended that custodians work toward balancing program needs with real property requirements, attend to growing deferred maintenance costs, improve real property accounting practices, pay more attention to real property policy requirements, and establish a centralized data system that links financial information to federal real property assets.

In the 2000s, other reviews, with more limited scope, were conducted, including the Capital Asset Review by the Secretariat (2004), the Capital Asset Management Review by Deloitte (2011), and the Report on Surplus Properties by CBRE (2013). Similar to the 1994 Auditor General’s Report, these reviews highlighted the lack of central leadership, oversight and strategic approach to federal fixed asset management. They also highlighted the absence of an enterprise view of the portfolio, resulting in lost opportunities, inefficient business processes, concerns about the accessibility and quality of real property information, and increasing deferred maintenance costs, with an emphasis on growing operational and asset integrity issues.

Despite these challenges, investments continued to be made in major real property projects (for example, Parliamentary Precinct renovations), individual custodians continued to receive program integrity funding to address rust-out and deferred maintenance issues, and new real property acquisitions continued to take place – the lights have stayed on and government programs and services have been delivered more or less uninterrupted. Yet, these investments have been made in the absence of an integrated, whole-of government perspective, and on a case-by-case basis without a broader context. Moreover, the government made significant investments in federal infrastructure through Canada’s Economic Action Plan in 2009, and, more recently, the Federal Infrastructure Initiative I in 2014 and the Federal Infrastructure Initiative II in 2016. Further, in Budget 2017, the government announced the development of the federal science infrastructure strategy to provide a more integrated approach to future investments in science infrastructure, and in Budget 2018, invested $2.8 billion over five years for the renewal of federal laboratories. Although these funding infusions have helped stabilize the real property portfolio in the short term, there is still a significant need for a long-term solution.

Figure 6: real property beyond the bricks

Review framework and methodology

To realize a Budget 2017 commitment, the Secretariat has undertaken a horizontal review of federal fixed assets. Twenty-seven custodial departments and agencies were scoped into the Review (Crown corporations were not in scope). The Review was mandated to assess the federal real property portfolio through an asset class lens, as well as examine horizontal issues trending across the portfolio. The assessment of 4 key and 11 minor asset classes was staged in four phases:

• Phase I: science and technology
• Phase II: office and other (housing, warehousing, commercial and retail, education and training, legislative, judicial and diplomatic)
• Phase III: engineering and other (parks and recreation, assembly and cultural, and managed land)
• Phase IV: security and safety and other (health, medical and dental)

The Review analyzed the federal real property portfolio and asset classes, as well as framed its recommendations through six horizontal themes, outlined in Figure 7.

Figure 7: review assessment framework

Governance

Assess the current governance model (that is, custody, management, oversight) and professional capability in the real property community. Provide recommendations on optimal business model

Leveraging

Explore opportunities to leverage the real property portfolio to achieve broader government objectives (for example, greening, affordable housing, reconciliation, heritage and social purpose) and enhance the value of real property assets for Canadians.

Portfolio management

Assess the state of the real property portfolio (for example, age, condition, utilization) and the maturity of demand and supply integration. Provide advice on the most effective portfolio management practices.

Divestiture

Assess the current state of the surplus property inventory, and provide advice on innovating and streamlining the business processes to accelerate disposals and maximize value.

Funding sustainability

Assess the current financial management environment (for example, expenditures, trends, deferred maintenance, revenues, accounting protocols) and levels of funding to provide advice on long-term funding sustainability.

Information and information management

Assess the current state of real property data and information management systems. Provide advice on how to improve data quality and information management in support of evidence-based decision-making.

Adapting an enterprise transformation methodology, the Review took stock of the federal real property inventory (including extensive qualitative and quantitative data collection and analysis), framed a desired state (on the basis of jurisdictional and industry review with a focus on the latest trends and best practice, and consultations with custodians and other stakeholders), identified the gap between the current and desired state, conducted an options analysis, and developed a comprehensive suite of recommendations, along with a roadmap for action. The Review’s research demonstrated that there is no perfect solution that can be readily applied in the Canadian context. Instead, innovative ideas and strategies present in other jurisdictions could be adapted to the Canadian context to formulate effective, made-in-Canada solutions.

Review findings and observations

• In this section

  • Profile of the federal real property portfolio
  • State of the federal real property portfolio

Profile of the federal real property portfolio

The Government of Canada owns and manages the largest and most diverse real property portfolio in the country, with 32,000 buildings, 23 million m² of floor space, approximately 20,000 engineering assets, and 39 million hectares of land. This portfolio is distributed across densely populated urban centres and northern, rural and remote communities in Canada as well as capital cities around the world. Ninety-seven per cent of the Government of Canada’s total floor area is located within Canada, and 3% is outside of Canada. Inside Canada, the top five regions that represent the largest percentage of the government’s floor area are the National Capital Region (22%), Ontario (18%, excluding Ottawa), Quebec (13%, excluding Gatineau), Alberta (10%), and British Columbia (9%) (see Figure 8). Map 1 provides examples of the Government of Canada’s real property assets across the country and illustrates the vast geographic distribution and diversity of the assets.

Map 1 - Text version

This map shows a number of locations across Canada, each represented by a dot that is one of four sizes. The smallest dots represent areas where there are one to five Government of Canada buildings within 25 kilometres of a particular location. The largest dots indicate areas where there are 101 to 1,388 such buildings within 25 kilometres of a particular location.

1. Canadian Forces Station Alert
Military Base
Alert, Nunavut
(National Defence)
Image © National Defence

2. Bedford Institute of Oceanography
Science Facility and Coast Guard Base
Dartmouth, Nova Scotia
(Fisheries and Oceans Canada)
Image © Fisheries and Oceans Canada

3. La Citadelle de Québec
Military Base and Official Residence, Québec, Quebec
(National Defence)
Image © Musée Royal 22e Régiment

4. Place du Portage, Phase III
Office Building
Gatineau, Quebec
(Public Services and Procurement Canada)
Image © Public Services and Procurement Canada

5. National Research Council Saskatoon Office
Science and Research Facility
Saskatoon, Saskatchewan
(National Research Council)
Image © National Research Council

6. Esquimalt Graving Dock
Marine Infrastructure
Victoria, British Columbia
(Public Services and Procurement Canada)
Image © Public Services and Procurement Canada

Figure 8: geographical distribution by floor area (m²)

Region	Percentage of floor area
Alberta	10%
British Columbia	9%
Manitoba	5%
National Capital Region	22%
New Brunswick	5%
Newfoundland and Labrador	3%
Northwest Territories	1%
Nova Scotia	6%
Nunavut	1%
Ontario	18%
Prince Edward Island	1%
Quebec	13%
Saskatchewan	3%
Yukon	< 1%
International	3%

The federal real property portfolio is predominantly Crown-owned (90% of the buildings and 80% of the floor area).^{Footnote 8} Much of the Crown-owned portfolio is special-purpose in nature, ranging from science and technology (for example, laboratories, wind tunnels, hatcheries, observatories) and engineering assets (for example, bridges, roads and highways, wharves, canals, central heating and cooling plants) to security and safety (for example, military bases, armouries, correctional institutions, ports of entry) and parks and heritage assets (for example, national parks, monuments, parliamentary and judicial buildings). Within the federal office portfolio, however, there is a relatively equal distribution between Crown-owned and leased assets – 48% of the floor area is Crown-owned, and 52% is leased.^{Footnote 9}

Figure 9: top five custodians by floor area (m²)

	National Defence	Public Services and Procurement Canada	Correctional Service Canada	Royal Canadian Mounted Police	Global Affairs Canada	Other
	39%	31%	6%	5%	3%	16%

The five largest custodians of federal real property assets by floor area (m²) are National Defence (DND) (39%), Public Services and Procurement Canada (PSPC) (31%), Correctional Service Canada (CSC) (6%), the Royal Canadian Mounted Police (RCMP) (5%), and Global Affairs Canada (GAC) (3%) (see Figure 9). In total, these five custodians own and manage 84% of the government’s real property portfolio, representing 19 million m² of the total floor area.

Among the 15 asset classes the Review examined, the security and safety asset class has the largest portfolio, with 38% of the total Government of Canada floor area. This portfolio is followed by the office (28%), housing (12%), and science and technology (11%) asset class portfolios. The Government of Canada also has a sizable engineering asset class portfolio, which includes approximately 20,000 engineering assets (for example, runways, breakwaters, graving docks, seawalls, canals, irrigation systems, and electrical power generation and distribution systems). The engineering asset class portfolio represents nearly 40% of the overall Government of Canada real property portfolio, with an estimated replacement value of $39 billion. Many of these engineering assets are public-facing and of significant importance to the Canadians who use them on a regular basis. The Government of Canada’s portfolio also includes various minor asset classes, including housing, warehousing, commercial and retail, education and training, legislative, judicial, diplomatic, parks and recreation, assembly and cultural, managed land, and health, medical and dental. Despite their relatively small size, these asset classes support the delivery of valuable federal programs (such as representing Canada in the international arena, supporting annual celebrations of Canadian heritage, carrying out Canadian democracy, upholding the rule of law, and delivering critical health care services to Indigenous communities). The 10 minor asset classes, excluding managed land, account for 24.3% of the overall Government of Canada portfolio by floor area.

State of the federal real property portfolio

Federal buildings

Generally, four key performance measures are used in assessing the performance of a real property asset or portfolio: functionality, utilization, physical performance and financial performance.^{Footnote 10} Using the information collected from custodians on age, condition and deferred maintenance, the Review assessed physical performance of the Government of Canada’s building portfolio. This analysis also provided insight into the functionality of the portfolio, given that as an asset ages and its condition deteriorates, the asset’s ability to support program delivery declines.

Figure 10: Government of Canada real property portfolio by year of construction

	Prior to 1900s	1900s	1910s	1920s	1930s	1940s	1950s	1960s	1970s	1980s	1990s	2000 to present
Over 50 years old	2%	1%	1%	1%	2%	6%	28%	11%	11%	-	-	-
25 to 49 years old	-	-	-	-	-	-	-	-	-	11%	13%	-
Less than 25 years old	-	-	-	-	-	-	-	-	-	-	-	12%

The average age of Crown-owned assets is 49 years. Research shows that there are definitive points in the life cycle of a building when the asset’s base systems, envelope and interior space begin to require considerable interventions.^{Footnote 11} Typically, buildings that are less than 25 years old are associated with low to medium risks of failure of building structure and/or systems. Buildings that are 25 to 49 years old are considered to pose higher risks because many major building components may be reaching the end of their useful life. The highest liability for health and safety risks arising from issues such as system failures, building closures, or interruption to the delivery of programs and services are commonly associated with buildings that are 50 years of age and older.

Figure 11: Government of Canada real property portfolio by condition

	Good	Fair	Poor	Critical
Percentage of number of buildings	28%	54%	16%	2%
Percentage of floor area	31%	46%	20%	3%

For portfolios where assets have been well maintained and have had life-cycle building component upgrades, the age of the asset alone is not a reason for concern. However, in the context of the federal real property portfolio, age becomes an important indicator of condition given the substantial amount of deferred maintenance that has accumulated. Currently, 52% of the Government of Canada’s Crown-owned buildings are 50 years of age or older, meaning that they are in the highest risk category, while 28% are between 25 and 49 years of age, signalling that if necessary investments are not made, these assets will deteriorate prematurely (see Figure 10).

The analysis of the currently available data on the federal real property portfolio shows that there is an inverse relationship between age and condition – as an asset gets older, its condition worsens, resulting in the compounding and accelerated accumulation of deferred maintenance. The analysis of the condition projections developed by the Review shows that, in the next 10 years, more than 50% of the total Government of Canada floor area will deteriorate to poor or critical condition, and the floor area in critical condition will surpass the floor area for each of the other condition categories (see Figure 12).^{Footnote 12} Such deterioration will significantly erode the ability of these assets to support government programs and will lead to a considerable increase in costs.

Figure 12 - Text version

Figure 12 consists of two graphs: a line graph and a stacked area graph. Both graphs illustrate the data set out in the following table:

	Actual floor area			Projected floor area
	2013	2016	2019	2022	2025	2028
Good	4,361,844	4,420,832	3,834,961	3,447,828	3,043,179	2,530,846
Fair	2,951,215	2,698,798	2,580,226	2,327,893	2,061,204	1,720,149
Poor	1,755,193	1,895,970	2,156,928	2,297,215	2,394,187	2,358,770
Critical	367,269	419,921	863,406	1,362,585	1,936,952	2,825,756
Notes Total floor area is 9.4 million square metres. Average age in 2019 for condition categories are as follows: good: 43.2 years; fair: 50.2 years; poor: 57.1 years; critical: 60.1 years.

As shown in Figure 13, the cost to address deferred maintenance increases significantly for real property assets that are in critical condition – the cost is 12 times higher for science facilities and 5.6 times higher for office buildings – highlighting that it is more expensive to maintain and repair older, inefficient building systems. Based on the models and projections developed by the Review, in collaboration with Statistics Canada, the deferred maintenance of the government’s real property portfolio is estimated to be $20 billion (excluding engineering assets). Given the status quo, this amount is expected to grow by approximately $2 billion per year.^{Footnote 13}

Figure 13: cost to address deferred maintenance

Figure 13a: cost to address deferred maintenance, science and technology portfolio ($)

	Good	Fair	Poor	Critical
Deferred maintenance cost per square metre by condition category	277	676	906	3,211

Figure 13b: cost to address deferred maintenance, office portfolio ($)

	Good	Fair	Poor	Critical
Deferred maintenance cost per square metre by condition category	169	491	472	953

Federal engineering assets

The current state of the engineering asset class portfolio is similar to the building portfolio, but the information for this asset class is more limited. The Government of Canada did not have an enterprise view of its engineering assets, as this information is currently not captured in the Directory of Federal Real Property. Therefore, the Review developed the first high-level inventory of federal engineering assets.^{Footnote 14} To facilitate the Review’s analysis, these engineering assets were grouped under five major categories (that is, transportation land, transportation marine, transportation air, waterways, and utilities and services). This grouping was based on other jurisdictional and industry best practice, as well as the unique characteristics of the assets.

Figure 14: Alaska Highway, British Columbia

Like the building portfolio, age is used as an indicator of asset condition or replacement need for engineering assets. However, it is difficult to draw accurate conclusions about the current state of the overall engineering asset portfolio based on the available data on age. Different engineering asset types have different design (expected) lives. For instance, highway bridges, rock breakwaters and large dams have design lives in the range of 75–100 years, whereas the design life of floating wharves is 20–25 years. Design lives can be extended with diligent ongoing maintenance and repair or be shortened by neglect or climate change impacts. Custodians reported that age is a major concern, as aging assets can compromise the integrity of their portfolios in terms of safety and performance.

Condition information was reported for 65% of the reported assets. Custodians cited various reasons for not providing condition information on the rest of the engineering portfolio, such as the information not being collected, information being collected at the local level but not available in a central system, or information being too old to be reliable. The limited level of reporting for condition information is concerning as this information is foundational for identifying needs and prioritizing investments to mitigate risks, such as mission failure. As an industry best practice, the condition assessment of engineering assets is generally done using five condition categories, rather than the four used in building condition assessments. The information collected shows that 9% of the reported assets are in very good condition, 34% are in good condition and 39% are in fair condition, while 13% are in poor condition and 5% are in very poor condition. Although the available data suggests that the overall condition of this asset class is fair to good, the lack of data for 35% of reported engineering assets and the lack of standardized condition assessment processes across the Government of Canada portfolio raise concerns about the integrity of the reported condition data.

Figure 15: Canada Place Building, Edmonton, Alberta

Functionality is critical to understanding how engineering assets are meeting their defined program and service requirements and whether they are delivering value for money. Functionality is generally determined by factors such as how well the custodian adheres to accepted engineering standards; risk and performance reports/criteria; and defined priorities, timelines and reliability requirements. Most custodians routinely measure functionality, although they may not use a formal performance management framework or a centralized system to capture this information. Horizontal assessment of functionality cannot be undertaken given the absence of common performance indicators for functionality across custodians.

Figure 16: St. Andrews Lock and Dam, Lockport, Manitoba

Engineering assets, like buildings, deteriorate over time. The Review developed a model to estimate projected capital and maintenance investment needs for engineering assets over the next 50 years, using the age, condition and replacement cost information reported, as well as typical asset deterioration curves and service lives by asset type. According to this model, in the next 10 years, there will be an investment requirement of approximately $10 billion in maintenance and $8 billion in capital, highlighting a funding pressure of approximately $18 billion for engineering assets.

To conclude, the federal real property portfolio (both buildings and engineering assets) is aging, deferred maintenance costs are increasing, and the condition and functionality of the assets are declining. If no action is taken, the federal real property portfolio will continue to deteriorate progressively. This accelerating deterioration will increase operational, financial, legal and reputational risks and liabilities, and compromise the portfolio’s ability to support federal programs and services and achieve broader government objectives.

Figure 17: Kluane National Park and Reserve, Kluane, Yukon

Root cause analysis

The Review undertook a root cause analysis to understand the underlying causes that have led to the current state of the portfolio. The Review examined the portfolio through an asset class lens and assessed horizontal issues that cut across all the asset classes. The findings show that a number of interconnected, systemic and complex causes have led to the current state, including a lack of profile, leadership and oversight at the enterprise and departmental level; absence of strategic portfolio management; transactional rather than strategic focus in the workforce; volatile and unsustainable funding; unreliable and inconsistent data and unintegrated legacy systems; siloed management practices; and inefficient business processes. Most of the custodians reported an erosion of their real property budgets over time due to increases in operating costs, the general absence of protection against inflation, program growth, and the effects of policy premiums (for example, greening, accessibility). Figure 18 provides a synopsis of the Review’s high-level findings and observations against the backdrop of the horizontal lenses that guided the analysis.

Figure 18: strategic and operational insights

The Review observed common challenges in a number of other jurisdictions, such as the United States, the United Kingdom, Australia, New Zealand, the Province of Ontario and the City of Toronto. These jurisdictions are also struggling with aging and deteriorating portfolios that have significant deferred maintenance backlogs, and are facing challenges in ensuring sustainability of their portfolios, implementing strategic portfolio management, achieving data integrity and enhanced use of data analytics, disposing of their surplus assets, and creating a workforce that is well aligned with the needs of the portfolio. Most of these jurisdictions have initiated transformational change to address the systemic legacy issues of their real property portfolios, and to transform their approach to real property management from an opportunistic savings realization approach to a more proactive approach that considers property as a strategic platform to deliver government’s wider objectives.

Shared path forward: real property transformation

Consistent with other jurisdictional best practice, at the macro level, the Review recommends that the Government of Canada transform the management of its real property, and modernize, right-size and green its real property portfolio to position Canada for the 21st century and beyond. Given the scope and scale of the challenges that the government’s real estate holdings face, the Review recommends undertaking immediate, integrated and systematic actions on multiple fronts to ensure a successful transition from the legacy portfolio and traditional management practice to a modern, right-sized, agile, and financially and environmentally sustainable portfolio, managed with a forward-looking, strategic and citizen-centred perspective. Figure 19 outlines the high-level recommendations of the Review.

Governance

Establish a robust governance and oversight structure to raise the profile of real property, provide leadership, and enhance professional capability

Leveraging

Create an environment in which real property is recognized as a strategic enabler that advances broader socio-economic objectives, becomes a platform for innovation, and is a valued resource for citizens

Portfolio management

Embrace and commit to the implementation of a disciplined and systematic portfolio management regime as a priority

Divestiture

Adopt a new and innovative approach to divestiture by streamlining business processes and consolidating expertise to accelerate disposals and maximize value

Funding sustainability

Develop a new approach to funding sustainability to ensure an affordable and sustainable portfolio in support of program delivery

Information and information management

Real property asset classes

Place data and systems improvement at the forefront, and make business intelligence and data analytics the backbone of real property management

Advance targeted recommendations for each asset class

Given the interdependencies between the multiple causes that led to the current state of the portfolio (for example, aging and deteriorating portfolio, and increasing deferred maintenance backlog in the face of rapidly evolving programs and a changing environment), the government needs to adopt a holistic, phased and multi-faceted approach that will facilitate intentional and mindful actions on a number of fronts. This approach will require sustained commitment, continued leadership and careful execution of a well-thought-out plan, which would be reassessed and adjusted as needed throughout the implementation process. Figure 20 outlines the phases and the expected outcomes of the real property transformation.

As illustrated in Figure 20, the Review has initiated the change management process and has already delivered tangible results. Building on this momentum, the Review’s comprehensive suite of recommendations should be endorsed and implemented with agility, a sense of urgency and speed. Given the significant changes that have been unleashed by the COVID‑19 pandemic, the current context provides a generational opportunity to transform and modernize the federal real property portfolio in the light of future-oriented program direction. It is an opportunity to create a flexible, agile, green and right-sized portfolio for the future, and to re-envision the Government of Canada’s real property portfolio as a strategic platform to achieve broader government objectives (for example, demonstrate government leadership by creating a climate-resilient, accessible and inclusive portfolio that can be leveraged to attract and retain talent, build communities and partnerships, protect the environment, and stimulate the economy).

Immediate foundational actions

• In this section

  • Governance: establish a robust governance and oversight structure and enhance professional capability
  • Portfolio management: commit to implementing a disciplined and systematic portfolio management regime
  • Funding sustainability: develop a new approach to funding sustainability
  • Leveraging: create an environment in which real property is recognized as a strategic enabler
  • Divestiture: adopt an innovative and streamlined approach to divestiture
  • Information and information management: place data and systems improvement at the forefront, and make business intelligence and data analytics the backbone of real property management

Conclusion

The Government of Canada owns the largest and most complex real property portfolio in Canada, with 32,000 buildings, 20,000 engineering assets and millions of hectares of land spread from coast to coast to coast, supporting the delivery of invaluable federal programs and services to Canadians. Recognizing the value of real estate as a key enabler of program delivery and the challenges facing this portfolio, the government announced a horizontal review of federal fixed assets in Budget 2017. The Review undertook the most extensive study of the management of federal real property in over 35 years and assessed the portfolio through an asset class lens, while also examining horizontal issues trending across the portfolio.

The Review’s analysis clearly demonstrated that the Government of Canada’s real property portfolio is aging, deferred maintenance costs are increasing, and the condition and functionality of the assets are declining at an accelerated rate. The result is an accelerating decline in the portfolio’s ability to support rapidly evolving program requirements within the context of technological innovation and socio-economic, environmental and demographic changes. If no action is taken, this accelerating deterioration will increase the operational, financial, legal and reputational risks and liabilities of the Government of Canada and compromise the portfolio’s ability to support the delivery of federal programs and services. Thus, the Review highlights that the status quo is no longer an option as it is no longer sustainable. The Review therefore recommends that the government transform how it does business and what it delivers. Recognizing that several interconnected, systemic and complex causes have led to the current state of the portfolio, the Review recommends undertaking immediate, integrated and systematic actions on multiple fronts to achieve a successful transition from the legacy portfolio and traditional management practice to a modern, right-sized, agile and financially and environmentally sustainable portfolio, managed with a forward-looking, strategic and citizen-centred perspective.

Although the Review was launched three years ago, it has never been timelier than now to deliver this comprehensive report on real property management, given the significant changes that the novel COVID‑19 pandemic has unleashed in Canada and around the world, leaving no sector untouched and resulting in the critical task of envisioning a new economy in its wake. The Government of Canada has a generational opportunity to transform real property management and modernize, right-size and green its real property portfolio for current and future generations. There is a new sense of urgency underlying the Review’s recommendations, which can be the catalyst to respond to the reformulation of the government’s priorities, showcase world-class leadership in climate action, deliver large-scale economic and employment opportunities, and navigate the accelerated impacts on the future of work, the workplace, and how government delivers programs and services. The built environment, whether it comprises police detachments, prisons, laboratories, office buildings or other assets, is undergoing a fundamental shift. In this context, agile and strategic long-term planning for the government’s real property portfolio is more crucial than ever. The Review has already initiated the change management process within the federal real property community. With the government’s agreement and commitment to real property transformation and implementation of the Review’s recommendations, the momentum generated by the Review can be further cultivated, and a genuine transformational change can be launched to create a modern, agile, and financially and environmentally sustainable government real estate that benefits all citizens in the 21st century and beyond – government real estate in service of Canadians.